Markets nervous as deadly Kenya tax revolt continues

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Markets have reacted with nervousness to the violence and political instability in Kenya.

Kenya has become embroiled in nationwide riots that have reportedly left at least twenty people dead amid public anger over a proposed Finance Bill that set out significant tax hikes on essential goods and services.

Jason Tuvey, deputy chief emerging markets economist at Capital Economics in London, tells African Business that “the escalating protests in Kenya will add to the near-term headwinds facing economic activity as well as raise further question marks over the government’s ability to push through fiscal consolidation measures.”

“That could ultimately cause fears of a sovereign default – which had subsided earlier this year after a Eurobond buyback – to build again.”

While the government agreed to drop some of the tax measures earlier in the week, this has done little to calm tensions, with the riots continuing to escalate. In dramatic scenes, the Kenyan parliament in Nairobi was stormed and set on fire by protestors. Police have reportedly fired live ammunition at demonstrators. Ruto has claimed that the debate around the tax measures has been “hijacked by dangerous people”.

President Ruto initially aimed to introduce a 16% value-added tax on bread and a 25% duty on cooking oil. The Finance Bill also proposed a new annual tax on